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Star fund manager launches second income fund: which is right for you?

Written by: Adam Lewis
Woodford Investment Management has today opened the doors for investment into its second income focused fund, the CF Woodford Income Focus fund. How does it differ from the original and which is more appropriate for you?

Investors have until noon on April 12 to invest in the new CF Woodford Income Focus fund at a fixed offer launch price of 100p per share.

The fund is the second open-ended fund in the group’s stable, following the launch of the now £10bn Woodford Equity Income fund in June 2014. Woodford also manages the Woodford Patient Capital Trust, a closed-ended fund which raised £800m during its initial public offering (IPO) in April 2015 making it the biggest launch in investment trust history.

Laith Khalaf, senior analyst and Hargreaves Lansdown, said: “Neil Woodford puts bums on seats, and we expect plenty of investor interest in his new high yield offering, particularly in light of the fact that many income-seekers have been left high and dry by low interest rates.”

Ahead of the new launch, it was recently reported that investors had been selling out of his existing CF Woodford Equity Income fund to free up money to invest in the new vehicle.

How do the two funds differ?

Investing in about 50 stocks, the new Woodford Income Focus fund is more concentrated than the Equity Income fund’s portfolio of about 120 stocks. This is because as opposed to the existing fund, which is managed with total return mindset, the focus this time around is purely on delivering income.

The new fund also has the ability to invest in international companies, whereas Woodford Income can only invest up to 20% of its assets overseas. As a result, the new fund will sit in the Investment Association (IA) Specialist sector, not the IA UK Equity Income sector.

Woodford however was keen to stress at the outset the fund will be predominantly invested in UK companies.

He said: “The focus is on dividend-paying stock market-listed securities and no geographic constraints – allowing me the flexibility to capture income from international equities when, and if, appropriate.”

The overall stated aim of the new Woodford Income Focus fund is to deliver an income of 5p per share per year, which is equivalent to a yield of 5%.

Equity Income vs Income Focus

As of today investors have the choice of two income funds run by Neil Woodford.

Khalaf suggests the new Income Focus fund is more appropriate for investors prioritising income, for instance those in retirement, while the existing Woodford Equity Income fund is more appropriate for those seeking long-term growth, such as younger investors building up a Junior ISA or a nest egg in their SIPPs and ISAs.

“Investors looking for similar large cap UK Equity Income funds might consider Artemis Income or Threadneedle UK Equity Income; those looking for a fund to dovetail with Woodford Income Focus might consider Marlborough Multi Cap Income, which invests predominantly in medium and smaller companies,” Khalaf said.

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